Ex-RBC advisor gets prison term

Henry Cole, a financial advisor hired by RBC Dominion Securities despite a previous run-in with regulators, was sentenced to two-and-half years in prison Wednesday after pleading guilty to fraud.

Mr. Cole admitted to using deception and forged signatures to persuade RBC clients to transfer more than $2-million into what he described as a “pooled fund” of real estate properties.

A statement of facts presented to Justice William Wolski of the Ontario Court of Justice said the client money was actually transferred to Mr. Cole’s personal numbered company, which had nothing to do with RBC or prominent families as he had indicated.

RBC, the investment banking arm of Royal Bank of Canada, repaid several members of a family and other investors who were caught up in the fraud perpetrated by Mr. Cole.

“We deeply regret the hiring of Mr. Cole and the impact of his conduct on some RBC clients,” Katherine Gay, a spokesperson for the bank, said Wednesday.

According to documents filed with the court, a wealthy widow and her family — last name Robinson — had taken their business to the 53-year-old Mr. Cole in 2008 after losing money on investments during the financial crisis and becoming disenchanted with another RBC advisor.

A second count of fraud against Mr. Cole was dropped by prosecutors.

In addition to pleading guilty in the criminal fraud case, Mr. Cole settled with regulators on Wednesday. He agreed to a permanent ban from the financial industry where, the court heard, he has earned his living since graduating from the University of Toronto with a commerce and economics degree. He also agreed to a pay a fine of $5-million to the Investment Industry Regulatory Organization of Canada (IIROC).

Regulatory filings indicate there were more victims of Mr. Cole’s fraud and that the total amount of funds “misappropriated” was $5-million.

“He will never work in the financial services industry again,” Scott Fenton, Mr. Cole’s lawyer, said during the court hearing Wednesday morning.

Explaining the impact of the guilty plea to the judge, Mr. Fenton said Mr. Cole was also forced to sell his house because RBC is pursuing him to repay the restitution to clients.

Bankruptcy documents filed last year showed Mr. Cole owned a $1.5-million condominium in a converted church in Toronto’s posh Rosedale neighbourhood. RBC held the mortgage.

Mr. Fenton said Mr. Cole’s own family financial obligations may have contributed to “some of the bad decision-making” that landed him in court.

During the hearing, Mr. Cole told the judge he wanted to “apologize for my behaviour” and said he was “sorry for the victims.”

One member of the Robinson family was in the courtroom and slipped out quietly after Mr. Cole was led out in handcuffs.

Mr. Cole was hired by RBC in 2005. Sources have said the investment dealer arm of the country’s biggest bank was aware of his previous scrape with regulators.

In 2002, Mr. Cole was sanctioned in one of the highest-profile cases undertaken by the Investment Dealers Association of Canada, a predecessor of IIROC.

Rampart Securities Inc. was the first brokerage to be shut down by the IDA. The regulatory action came amid accusations of numerous breaches of client due diligence, supervision and compliance with regulations. As a member of Rampart’s executive committee, Mr. Cole was ordered to pay $125,000 and was banned from senior jobs in the financial industry for 10 years.

It is understood he was permitted to work at RBC because his earlier sanctions were not related to his conduct with clients and his job did not fall into the supervisory and compliance categories from which he was banned.

Sources have said the bank and authorities became aware of Mr. Cole’s fraud in late 2010 after a client complained. He was dismissed for cause by RBC.

Mr. Cole was charged with two counts of criminal fraud in July of last year. The events that led to the charges took place in 2009 and 2010.